Frac Spread will not appear next week but will return on Jan. 3. Hart Energy wishes all of its readers a happy and safe holiday season.

The hypothetical NGL barrel at Mont Belvieu, Texas, continued its 10-week swoon to a 17-month low in the past week. Since reaching its high for the year of $41.65 at the start of October, the barrel’s price has fallen 39%.

That said, it was a pretty good week. With the exception of butanes, margins expanded at the Mont Belvieu and Conway, Kan., hubs as natural gas prices fled the zone of $4+ per million British thermal units (MMBtu) to the territory of $3+/MMBtu.

Warmer-than-average weather has tempered gas prices but that could change. The polar vortex, a whirling cone of stratospheric low pressure over the poles, strengthens during the winter because of the sharper contrast in temperature between the poles and mid-latitudes.

However, forecasters expect the vortex to weaken soon and deliver a cold, snowy January following the mild December. Amy Butler, an atmospheric scientist at the University of Colorado, told The Weather Channel that she expects the weakening to begin during the last week of December.

Typically, the weakened vortex will lead to cold air outbreaks in Eurasia first, before moving toward North America two to four weeks later. That could bring a chill to the eastern two-thirds of the U.S. by mid-January. The 2018 vortex weakening led to several nor’easters and then persistent chill into April.

EnVantage Inc. warned in a report that the last week of December is also a time of light trading and the weather could have an outsize effect.

“Be careful of the thin trading in the markets during that week that can lead to extreme volatility in the markets,” the analysts said.

Ethane is also down, absorbing a 9.5% hit at Mont Belvieu and a 13.2% drop at Conway in the past week. Mont Belvieu’s price of 27.48 cents per gallon (gal) is the lowest since May and only the second time it has dropped below 30 cents/gal in second-half 2018.

EnVantage explains this as the result of the link between ethane and natural gas prices and expects that link to remain close until mid-January or even mid-February. That’s because crude oil prices are likely to remain low and ethane cracker demand will continue to be sluggish from less demand from struggling Asian market. EnVantage does not expect this to change until the middle or even end of first-quarter 2019.

In Pennsylvania, Energy Transfer Partners’ (NYSE: ETP) subsidiary Sunoco LP continues to lurch toward putting its Mariner East 2 pipeline into service by year-end. On Dec. 19, the district attorney of Chester County, Pa., said he had opened a criminal investigation into construction of the pipeline following an explosion in September in Beaver County.

In the week ended Dec. 14, storage of natural gas in the Lower 48 experienced a decrease of 141 billion cubic feet (Bcf), the U.S. Energy Information Administration reported, compared to the Bloomberg consensus prediction of a 135 Bcf withdrawal and the Stratas Advisors expectation of a 120 Bcf withdrawal. The figure resulted in a total of 2.773 trillion cubic feet (Tcf). That is 20.1% below the 3.47 Tcf figure at the same time in 2017 and 20.6% below the five-year average of 3.493 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.

Comments